Is it the right time to buy a house? I used to live in an apartment, and I realized I wasn't ever going to save any money to buy a house. I decided to move in with/rent a room from a friend so I could save money. He is doing some renovation on the house, so we all have to move out. I have $30,000 sitting in a high yield personal savings account to which I'm currently contributing $1500 every month too. I currently owe $29,000 in school loans. I graduate with my masters in 1 year and after that I am unsure if I want to stay in the area, but I know I wouldn’t move right away. It would likely be at least 18 months from now if I move at all. I am unsure should I buy a house and rent out a room to a roommate or just rent a room from another person from my base. It would be nice to have a house that I call my own, but I know it’s a lot of reasonability and I stay very busy between work and school right now. If I buy a house, I am unsure how much I would put down because I would like to have some backup savings. I know would have to pay PMI and it would be harder to down school loans, but I would be building equity. If I rent a room again and I could theoretically save another ~$20,000. So, I could put $40,000 down on a house sometime next year, leave $10,000 in savings and no PMI or put $10,000 down on a house sometime next year, pay off school loans, leave $10,000 in savings and pay PMI. I do know my PMI would be less than school loan payment.
That is a question that all homeowners at one time or another have asked. Let me first commend you on your disciplined savings habits. I love to hear that you are saving money each month and that you are actively paying down your student loans. Also, congrats on getting your master’s degree in 1 year…that is amazing!!
As you make this buying/renting decision, let me give you a few things to think about. Your decision should be based on your overall readiness for home ownership as well as the amount of time you plan to keep the home. Here are a few benefits of renting vs. buying that you should consider.
While not a single factor can make this decision for you, ask yourself these questions and they should help guide your decision.
We’ve all heard stories about that person who bought a home in a housing boom and sold it 2 years later for a profit. However, in my experience, most people who own homes for a short period of time lose money on the transaction. That was my case when I was stationed at Eglin AFB. The military moved me to Las Vegas after only owning my home for 18 months and I became a reluctant landlord. The market had taken a downturn and I could not sell. However, even without that downturn, I did not even have time to build enough equity to even offset the realtor costs.
It took 6 years for the market to recover to the point to where I could sell the home. But, it did not recover to my purchase price. I fully understand the lure of home ownership, but I wish someone had walked me through the 7 steps above before I made that purchase. I believe my decision would have been different but, only you can answer them for yourself.
Best of luck with your upcoming decision.